The U.S. housing market reflects a patchwork of local needs, preferences, and geographies, creating distinct storylines. Across the country, many significant shifts have occurred over the last five years, an analysis of U.S. Census Bureau data shows. More expensive housing markets tend to support higher percentages of rental households, and in fast-growing metros, rentals have become a highly effective and flexible way to house new residents.
Cap Rates Push Higher as Underwriting Standards Stabilize
Arbor’s Small Multifamily Investment Trends Report Q4 2023, developed in partnership with Chandan Economics, is a snapshot of a strong and resilient subsector continuing to navigate ongoing market dislocation. The report shows that distress has remained limited, even with valuations and measures of risk pricing in flux. As conditions start to stabilize, there are signs that deal activity is picking up.
Key Findings:
- Small multifamily prices fell 3.2% during the quarter.
- Cap rates climbed 33 bps — the largest single-period jump since 2009.
- Property-level cash flows remained healthy as rent collections continued to strengthen and expense ratios normalized.